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A Royal-ty Beating

Oct 03, 2008
When minerals are extracted from federally owned lands, the businesses doing the extracting are required to pay royalties to the government, that is, to us. Such royalties comprise the second largest source of revenue for the federal government, after taxes. In fiscal 2007 alone, the government collected the equivalent of over $9 billion in oil and gas royalties.

We say “the equivalent” because around ten years ago, during the Clinton administration, the oil and gas industry managed to get a royalty-in-kind (RIK) program initiated by the Department of the Interior (DOI). In some of the key source areas of RIK revenues, over half are received “in kind.”

The recent disclosures regarding drug and sex scandals at DOI1 have ripped the lid off the Minerals Management Service, the office from which the scandals emanated. In the process, the shoddy practices regarding RIK collections and audits have come to light. Millions, perhaps billions, of dollars may have been underpaid by oil and gas companies during the life of the RIK program. The records are so opaque and incomplete that we may never know what happened to the money.

This all comes as no surprise to the Project on Government Oversight (POGO), which smelled a rat associated with the RIK program years ago and, since 1995, has published five reports on it. The latest, Drilling the Taxpayer: Department of Interior’s Royality-in-Kind Program, is the first to call for the abolition of the program altogether.

[I]n light of the proposed plan to expand the program yet again, and given the numerous damning reports about the RIK program and MMS’s inability to prove that it is beneficial to the taxpayers—even ten years after its first pilot program—enough is enough. The RIK program should be terminated, and the system should revert to collecting royalties through the royalty-in-value system.
Enron et al., tax cuts for the rich, Cheney’s secretive Energy Task Force, CEOs’ platinum parachutes, a collapsing financial system, and outright scandals such as the above: They all seem to point to a single-minded attempt to remove transparency and accountability from the American business sector, to the detriment of the people, the exhaustion of the people’s coffers, and the enrichment of a tiny few.

How many other such revelations, still obscured within the shadows of the most secretive administration in history, await the light of a new day and a new administration?
1 Sex, Drug Use and Graft Cited in Interior Department, by Charlie Savage, from the New York Times, September 10, 2008 (Accessed September 28, 2008)
tags: Politics | Business

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